Last year the Jumbo Loan market came to a screeching halt when the investor market for Jumbo loans disappeared and the difference between interest rates for a conforming loan and a Jumbo loan widened sharply.
The Conventional Wisdom at the time was that the big banks would seize the opportunity to own this market and would have the best Jumbo loan pricing around. But what happened was something quite different: mortgage loan losses at the big banks began to quickly dull the big bank's appetite for Jumbo loans. Since Jumbo loan investors also disappeared from the market place, the big banks would have to add these loans to their portfolio and take on the risk themselves instead of passing the risk off to an investor.
If a big bank was going to put a Jumbo Loan on their books, then by golly they were going to charge for that increased risk. The result: if you get a 30 Year Fixed Rate Jumbo loan from one of the big banks, the interest rate is likely to be in the eight-percent-plus range AND 1 to 3 points, depending on the bank! Even ARMs at the big banks have interest rates that are incredibly higher than their conforming ARMs.
NOW HERE'S THE GOOD NEWS: A handful of lenders are seeing this as an opportunity and if your customer works with the right loan expert, they are going to get far better interest rate pricing and in some cases, even more flexible qualifying terms than the big banks are offering today.
NICHE LENDERS: There are two lenders that specialize in lower-cost Jumbo ARMs. I am an approved broker for these lenders and their 5 and 7 Year ARMs rates for Jumbo loans are often as much as 1 percent LOWER than the big banks. Plus, these two lenders are FAR more flexible than the big banks in terms of their minimum credit score requirements. One of my customers, who could not qualify for an Interest Only ARM at one of the biggest banks, was able to get an Interest Only ARM at 1 percent LOWER than he was able to obtain at the big bank. He will save $1,500 a month in payments with his new ARM.
JUMBO FIXED MONEY HARDER TO FIND BUT STILL AVAILABLE: There are even lenders that offer both 15 year and 30 year Jumbo Fixed Rate loans today with interest rates up to one percent LOWER than the big banks. This is an apples-to-apples, interest rate and points comparison. CAUTION: With these Jumbo Fixed rate loans, the underwriting guidelines are often TIGHTER than with Jumbo ARMs, with lower debt-to-income ratio targets and higher credit score (740) thresholds for the best rates. But the good news is for those who do qualify, they are going to get a decent rate.
FINDING THE BEST OPTION: If you or your customers have questions about Jumbo loans, please contact Kevin Hawkins at (206) 866-1220 or (206) 843-3064 and toll-free at 800-846-6381.
